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Housing Risk and Property Derivatives: the Role of Financial Engineering


Syz, Jürg (2010). Housing Risk and Property Derivatives: the Role of Financial Engineering. In: Smith, Susan J; Searle, Beverley A. The Blackwell Companion to the Economics of Housing : The Housing Wealth of Nations. Oxford: Blackwell Publishing, 569-584.

Abstract

In many countries, tax authorities treat building savings favorably, in order to incentivize homeownership. A solution that addresses home price risk can be provided by using property derivatives. Index-linked mortgages thus provide Pareto improvements by allocating collateral risk more optimally and by reducing the number of default and related costs. Housing is one of the biggest financial assets that most households will ever own. However, management of housing risk is difficult, since there are virtually no instruments that insure against rising or falling home prices. The financial solutions which are described in this chapter would be able to allocate risks and returns more appropriately. Linking the financial instruments that are commonly used in the context of housing, building savings, and mortgages, to a home price index addresses the issues naturally.

Abstract

In many countries, tax authorities treat building savings favorably, in order to incentivize homeownership. A solution that addresses home price risk can be provided by using property derivatives. Index-linked mortgages thus provide Pareto improvements by allocating collateral risk more optimally and by reducing the number of default and related costs. Housing is one of the biggest financial assets that most households will ever own. However, management of housing risk is difficult, since there are virtually no instruments that insure against rising or falling home prices. The financial solutions which are described in this chapter would be able to allocate risks and returns more appropriately. Linking the financial instruments that are commonly used in the context of housing, building savings, and mortgages, to a home price index addresses the issues naturally.

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Additional indexing

Item Type:Book Section, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > General Business, Management and Accounting
Scope:Discipline-based scholarship (basic research)
Language:English
Date:2010
Deposited On:29 Aug 2023 15:38
Last Modified:30 Mar 2024 04:34
Publisher:Blackwell Publishing
ISBN:9781405192156
OA Status:Closed
Free access at:Official URL. An embargo period may apply.
Publisher DOI:https://doi.org/10.1002/9781444317978.ch24
Other Identification Number:merlin-id:5886